1973 Supreme(Del) 118

High Court Of Delhi
SHIV SHANKER LAL - Appellant
Versus
COMMISSIONER OF INCOME TAX, (DELHI CENTRAL) - Respondent
I.T.R. 18 of 1968
Decided On : 04/17/1973

The transfer of agricultural land is not liable to be assessed under section 45 of the Income Tax Act, 1961.

Headnote:

INCOME TAX ACT, 1961 - SECTION 2(14), 45, 47(III), 52 - GIFT TAX ACT, 1958 - SECTION 4 - WEALTH TAX ACT, 1957 - SECTION 2(E)(I) - TRANSFER OF AGRICULTURAL LAND - WHETHER AGRICULTURAL LAND - WHETHER PROVISIONS OF SECTION 52 OF THE INCOME TAX ACT, 1961 ARE APPLICABLE - WHETHER PROVISIONS OF SECTION 47(III) ARE APPLICABLE - WHETHER DIFFERENCE BETWEEN SALE PRICE AND MARKET VALUE LIABLE TO INCOME TAX AND GIFT TAX - WHETHER DOUBLE TAXATION.

Fact of the Case:

The assessee, a Hindu undivided family, owned a property called Amba Prasad Garden situated at Subzimandi, of the extent of 14,716 sq. yards and containing a garden house which covered an area of 312 sq. yards. On 25-6-1961 the assessee, his wife, his son and his daughter-in-law formed a company known as New Delhi Theatres Private Limited. The assessee, his wife and his son held 10 shares each and the assessee's daughter-in-law held 5 shares in this company. On 15-7-1961, the assessee sold 6,120 sq. yards of land out of Amba Prasad Garden along with the garden house situated therein to the company for Rs. 93. 450. 00. On 25-8-1961, the assessee sold 5,678 sq. yards from out of the remaining portion of the land to M/s. Ganesh Flour Mills Company Ltd. , at the rate of Rs. 60. 00 per sq. yard. In the income-tax return filed by the assessee for the assessment year 1962-63, the relevant previous year being the year ending 14-7-1961, the assessee declared a net income of Rs. 21,270. 00 and a capital loss of Rs. 54,060. 00. In computing this loss, the assessee had deducted Rs. 93,440. 00, the amount for which the property was sold to the company, from Rs. 1,50,000. 00 which, according to the wealth-tax return of the assessee was the value of the property. Although the assessee had claimed a capital loss in respect of the sale of this property to the company implying thereby that the property was a capital asset, during the course of the assessment proceeding he claimed that this was not a capital asset within the meaning of section 2 (14) of the Income-tax Act, 1961 (hereinafter REFERRED TO to as the Act) as it was in the nature of agricultural land. The Income-tax Officer did not accept the assessee's claim that it was an agricultural land and held that it was a capital asset. The Income-tax Officer was also of the view that the transaction in question came within the scope of section 52 of the Act and, therefore, estimating the market value of the property at Rs. 80. 00 per sq. yards, he held that the assessee had derived capital gains of Rs. 4,74,956. 00. He included this amount in the income-tax return of the assessee and completed the assessment on a total income of Rs. 5,04,104. 00.

Finding of the Court:

The Tribunal accepted all the three contentions of the assessee and held that the property in question was not a capital asset but an agricultural land, that the provisions of section 52 of the Act were not attracted and that the difference between the market value and the sale price having been assessed to Gift Tax, it was not liable to be assessed under section 45 of the Act. The Tribunal, therefore, deleted the amount of Rs. 3,80,664. 00 from the income of the assessee.

Issues: 1. Whether the property in question is an agricultural land? 2. Whether the provisions of section 52 of the Income-tax Act 1961 were applicable to the facts of the case? 3. Whether the provisions of section 47 (iii) were applicable to the facts of the case?

Ratio Decidendi: 1. The Tribunal was right in coming to the conclusion that the land sold by the assessee to the company was agricultural land on the date of the sale. 2. The Tribunal was right in holding that the provisions of section 52 of the Act were not attracted. 3. The difference between the consideration and the full market value of the property is exempted from assessment under section 45 of the Act.

Final Decision: Questions Nos. 1, 2, 3 and 5 are answered in the affirmative, i. e. , in favour of the assessee and against the Revenue. Question No. 4 is purely an academic question and an answer to it either in the affirmative or in the negative would not determine the real question at issue, namely, whether the sale of the land by the assessee in favour of New Delhi Theatres Private Limited is liable to assessment under section 45 of the Act. Therefore, we decline to answer this question. Question 6 is answered in the negative, i. e. , in favour of the Revenue and against the assessee.